Last week Amazon Web Services (previous CloudAve coverage) announced that they are lowering their support costs and also introducing a free plan.

The AWS Support program just got even better! We have added features, lowered prices, and created a new free support plan that includes immediate access to customer service and technical support for AWS issues, 24 hours a day, 7 days a week, 365 days a year.

Last week, I had a brief twitter discussion with few folks on who can disrupt Amazon, especially considering the rapid pace in which they are innovating in the infrastructure space. I thought I will do a quick post and write down my thoughts.

First on the pricing front

Amazon has quite a bit of leverage on the pricing and they can go further down to expand their market reach. If we look at Amazon’s retail strategy, they will even take a loss to gain market power. Under such circumstances, no other competitor can hit them on the pricing front and win the war. If you noticed the history of AWS’ pricing reduction, you can easily notice that they sense competition much faster and preemptively lower the prices to outsmart the competition. The current reduction in support prices fits the same story line. Even though there is no single player in the IaaS space who could compete effectively with AWS right now, I think this move by Amazon can be seen as a reaction to growing popularity of OpenStack project. Yes, OpenStack is too far behind to emerge as a direct threat to AWS but it has the potential to spawn (well, it is already spawning some) hundreds of smaller service providers whose main differentiation from Amazon will be on the support front. In fact, that is the premise of regional providers from the beginning. I have spoken to many SMBs and ISVs on why they are going to a different provider than Amazon and their response always is that I don’t want to be one of the forum members searching for possible solutions. In fact, an ISV in India went with IBM SmartCloud over AWS just for this reason. Right now Amazon appears to be winning the game even without a proper support system for their services but once OpenStack succeeds in lowering the barrier to entry and more and more smaller service providers get in, it could turn out to be a headache for Amazon. By lowering the prices and introducing a free support plan, Amazon is positioning themselves to fend off any threat from a federated ecosystem of cloud providers.

Who will disrupt AWS?

With Amazon innovating at a rapid pace and not giving room for the competitors to catch up, the natural question arises about who will emerge as a viable threat to Amazon in the market. AWS is several steps ahead of the competition on the innovation front and, at least, one step ahead on the pricing front. How can anyone disrupt a company who is in such an advantageous position? It is quite natural to dismiss any competition to AWS. But I see this in a different context. The OpenStack and CloudStacks of the world will lower the barrier to entry for service providers and help spawn hundreds of service providers, removing any cushion AWS has in terms of their market dominance. The competition will always keep AWS on the edge, pushing them to focus on protecting their turf and slowing down on the innovation front.

PaaS will emerge from the other side and make infrastructure fade away from the limelight. Cable companies and Telcos saw their investments become “dumb pipes” because they were sleeping on the job and not innovating. Unless Amazon shifts its strategy completely, it will see infrastructure become “dumb infrastructure” in spite of its appetite for innovation. A PaaS provider like AppFog (previous CloudAve coverage) could come in and make infrastructure completely irrelevant (I could see Ops people jumping up and down but I request them to understand the nuances in this argument) and disrupt AWS along with other providers. In short, the disruption of AWS (if it happens) will come from the PaaS vendors and not from another infrastructure services provider.

My arguments above could appear more like my hallucinations than reality but it is a plausible explanation based on what I observe in the market and some extrapolations. In a free market system, especially in today’s age where the information asymmetry is much reduced, a dominant leader can trip fast and lead to complete shakeup in the marketplace. If the PaaS players play their cards rights, fend away the FUD and if Amazon stays cocky about infrastructure by dismissing PaaS, there is a chance we will see this disruption in the coming years. Let us wait and see.

Director, OpenShift Strategy at Red Hat. Founder of Rishidot Research, a research community focused on services world. His focus is on Platform Services, Infrastructure and the role of Open Source in the services era. Krish has been writing @ CloudAve from its inception and had also been part of GigaOm Pro Analyst Group. The opinions expressed here are his own and are neither representative of his employer, Red Hat, nor CloudAve, nor its sponsors.

5 responses to “Who Will Disrupt AWS?”

Thats a very interesting point of view you have there and I think you may be right. Its happened to many giants before – just when they looked invincible they tripped up, or sometimes just got left behind all of a sudden as the game was changed (think Nokia, Microsoft). I also read a piece shortly before i came across your site http://news.yahoo.com/amazon-getting-too-big-britches-160025093.html and it talks about Amazon entering the B2B business, and that it perhaps may be a step too far. Its never a good idea to have to have your hands in too many pies!

We see that the emergence of Openstack and Cloudstack started empowering small and medium cloud service providers to provide Amazon like services. They can migrate their existing customers to cloud and keep them intact with their local support. Local small and medium cloud service providers have edge over Amazon in the places where Amazon do not have their data center. Open source private cloud platforms and PaaS can logically disrupt AWS. Innovation, Coverage and Support are the key factors and Amazon’s of the world should not be complacent with what they have.

I’d agree with the PaaS comment, developers ultimately don’t want to care about where to run their apps, they care about the middleware and data services, IaaS eventually is just commodity like internet, it should just work.